Signature
k = Delta_B / Delta_H
| Inputs | Definition | Unit |
|---|---|---|
Delta_B | Increase or decrease in expenditure under the budget considered | currency |
Delta_H | QALYs gained or forgone across the population because of the change in expenditure | QALYs |
k | Change in expenditure associated with a change of one QALY in population health at the margin | currency per QALY |
|---|
Function
Supply-side threshold function
Maps a change in health-care expenditure under a fixed budget, and the change in population health that results, to the cost at which the health system gains or loses one unit of health at the margin. This is the opportunity-cost basis of the threshold, distinct from a demand-side value placed on health.
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Implementations
Excel
Supply-side threshold from two named cells
Excel divides the expenditure change by the health change and returns #N/A when the health change is zero.
=IF(HealthChange<>0,ExpenditureChange/HealthChange,NA())
Assumptions
Marginal change under a fixed budget
Delta_B is small relative to the budget, so the services affected are those at the margin. A technology with a large budget impact is likely to displace more than marginal activity, so the relevant threshold for it is lower.
Health effects in the appraisal unit
Delta_H is measured in QALYs so that k can be compared with appraisal results. Estimates built from mortality effects are extended to life years and to QALYs, including effects on quality of life.
Specific to the system and period
An estimate applies to the health system, expenditure year and outcome data from which it was derived, and is updated as budgets and productivity change.
Worked examples
Illustrative marginal cost per QALY
A reduction of £10 million in expenditure is estimated to displace services that would have produced 800 QALYs, so k is £12,500 per QALY. The figures are illustrative. The central published estimate for the English NHS is £12,936 per QALY, at 2008 expenditure with 2008 to 2010 mortality data.
Delta_B = 10000000; Delta_H = 800; k = 12500
Common errors
Presenting a willingness-to-pay value as opportunity cost
A demand-side value of a QALY, estimated from willingness-to-pay studies, answers a different question from k. Such values are generally larger than supply-side estimates, so using one as k can approve spending that reduces population health under a fixed budget.
Dividing the whole budget by all QALYs produced
The average cost per QALY across the whole budget is not k. The threshold concerns the health produced by the marginal pound, which is the health lost when spending is displaced.
Sources
Empirical estimation of the NICE threshold
Claxton K, Martin S, Soares M, Rice N, Spackman E, Hinde S, Devlin N, Smith PC, Sculpher M. Methods for the estimation of the National Institute for Health and Care Excellence cost-effectiveness threshold. Health Technology Assessment. 2015;19(14):1-503, v-vi.
What the NICE threshold represents
McCabe C, Claxton K, Culyer AJ. The NICE cost-effectiveness threshold: what it is and what that means. PharmacoEconomics. 2008;26(9):733-744.
Canonical Identity
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